Hybrid work harms metropolitan eating places, bars: research

Commuters arrive at the Oculus station and mall in Manhattan on November 17, 2022 in New York City.

Spencer Platt | Getty Images

Sales are returning to pre-pandemic levels at many downtown restaurants and hotels — but only on Tuesdays, Wednesdays and Thursdays.

In cities like New York, Los Angeles, and Atlanta, the three-day in-person work week has presented challenges to the hospitality industry. With fewer employees in offices on Mondays and Fridays — the busiest days for some businesses — many businesses have been forced to stagger their hours or launch initiatives to attract customers at the beginning and end of the week.

Amali, a restaurant on the outskirts of Midtown Manhattan, pulls in just a quarter of its weekday business on Mondays and Fridays, said managing partner James Mallios.

Hotels are also seeing slower week starts and ends for business travelers. However, hotels across California have seen more instances of combined business and leisure travel, according to Pete Hillan, a partner at PR firm Singer Associates, which has clients in the hospitality industry.

WFH Research, which conducts surveys and research projects on work arrangements and hiring, released results last week showing remote work costs cities billions annually. According to data collected from June through November, the reduction in spending per person in New York City was $4,661, followed by $4,200 in Los Angeles and $4,051 in Washington, DC. The study outlined a dozen cities with annual spend reductions of over $2,000 per person.

Personal workdays fell the most in Washington, down 37% from pre-pandemic levels, followed by Atlanta at 34.9% and Phoenix at 34.1%. The information, financial, and professional and business services sectors are leading the way in working from home.

According to WFH Research co-founder Jose Maria Barrero, 28.2% of employees are hybrid—working some days in the office and some days remotely—compared to 12.7% who work entirely remotely. Though 59.1% of workers are on-site full-time, hospitality businesses that cater to office workers are still struggling to make ends meet, Barrero said. WFH Research found that before the pandemic, only 5% of paid work hours were done remotely.

Andrew Rigie, executive director of the New York City Hospitality Alliance, said people in business districts are more likely to spend more on breakfast or lunch or go out for after-work happy hour than at restaurants and bars in their own neighborhoods when working remotely.

However, the demand for corporate dinners and catered meals has not disappeared in many cases.

“We’ve found that there is significant demand from the business community, both for lunch and for the really fun happy hour later, in many ways at higher levels than before the pandemic,” said Steve Simon, Partners with Atlanta-based Fifth Group restaurants.

From the inner cities to the suburbs

This month, Manhattan’s only Ruth’s Chris Steakhouse announced it would be closing in April, and numerous midtown Manhattan restaurants, including the upscale Thai-inspired Random Access, have closed.

“Even if you’re busy on Wednesdays and Thursdays, your Mondays and Fridays can be really slow,” Rigie said. “If someone walks by a restaurant on a Thursday around lunch or dinner, they might say, ‘Wow, the restaurant is full, they’re so busy,’ but that’s not every day.”

The Bureau of Labor Statistics found in a study that an increase in remote work leads to a reduction in foot traffic in urban centers. A 10% drop in foot traffic in a census tract results in a 1.7% drop in employment in catering and accommodation, and a 1.6% drop in employment in wholesale and retail.

Areas with positive traffic growth saw employment gains in the same sectors.

“Particularly because the census areas where foot traffic has increased are more in the suburbs and moving away from the dense urban parts, it means that restaurant, bar and retail employment appears to be better in those areas suburban, less dense census areas,” said Michael Dalton, a bureau research economist who led the study published in August.

WFH Research’s Barrero said significant spending has been shifted to locations outside of inner cities, hurting city centers.

“To the extent that this shifts from New York City to adjacent counties within the metropolitan area, it means a lost sales tax for the city,” he said. “That goes hand in hand with a loss of passenger revenue and so on.”

Over the past six months, Barrero said, data has shown a stable number of days worked from home for the overall economy at just under 30%. There was a drop in remote work in January from 29% to about 27%, though he predicts the level of remote work will not fall below 25% in the near future.

“The bad news for these restaurant owners and whatnot is that I don’t think we’re going back to normal, and we’re probably pretty close to the new normal,” Barrero said.

resilience of the restaurant

Rigie of the New York City Hospitality Alliance said full-service restaurants could have more consistent business over the long term than fast-casual, limited-service restaurants that are more office-focused because of tourists and people going to shows crowds. However, full-service restaurants, which have higher overheads, will continue to struggle with staffing shortages, he said.

“Once the staff can see why I’m at this restaurant, when many nights aren’t as busy and I don’t make as much money, they might go to a restaurant in another neighborhood that’s busier earlier in the week” , he said .

Emily Williams Knight, CEO of the Texas Restaurant Association, said downtown Texas restaurants are seeing two different types of worker winbacks. She said Houston reported office space was 60% occupied, with a 30% vacancy rate, while Austin led the nation in returning to in-person work.

On a recent trip to downtown Houston, Williams Knight said she had “never seen empty streets like I’ve seen in the middle of the week, in the middle of the day.” She added that the return of conventions and business trips is particularly slow.

Houston and Dallas, which have an average commute time of nearly half an hour, have experienced small weekday crowds for lunch and happy hour in recent months. Combined with four decades of high inflation and labor costs that have risen more than 20% in the last two years, some restaurants have had to close or relocate, she said.

“If you had five, six, seven restaurants within blocks of each other and you could choose, you would try to go into town and eat at your favorite restaurant,” Williams Knight said. “Now that lack of choice is also keeping people at home, and all that dovetailing with that spending isn’t happening.”

Nick Livanos, owner of Livanos Restaurant Group, has two restaurants in Manhattan and two in Westchester. While Westchester restaurants offer more consistent lunch and dinner menus, Midtown’s Oceana is “extremely busy” on Tuesdays, Wednesdays, and Thursdays, but is much weaker on Mondays and Fridays.

Molyvos, the group’s upscale Greek restaurant, moved from Midtown to a smaller space in more residential Hell’s Kitchen in November. He said the new location has attracted longtime residents who are more loyal, like the Westchester crowd.

Rigie said inner cities need to focus on targeting not only office workers but also tourists and residents of nearby neighborhoods, while also having to change working hours, cut costs and build relationships with local businesses while remote work continues.

And despite discussions about converting many low-occupancy office buildings into residential units, restaurants may not benefit for years.

A handful of independent, single-unit restaurants in Houston and Dallas are moving to the suburbs.

Tracy Vaught, who owns five Houston-area restaurants, said business from downtown office workers isn’t picking up again until later in the week. Four of their restaurants are now closed on Mondays, and another is closed for lunch on Tuesdays and Wednesdays. She expects business to pick up at all locations as spring approaches.

“Suburb restaurants suffer from the same problems as downtown restaurants or in office parks, and that means not everyone is going back to work,” Vaught said.